The Participation of Africa in the General Agreement on Tariffs and Trade (GATT)

Regional Economic Co-operation in Developing Countries

the negOtlatlOn of the legal framework of international trade, encompassing, with its 91 members,3 the major part of international trade.

The Lagos Plan of Action and African Practice
African states have repeatedly committed themselves to active participation in the elabo ration of the framework and rules of international trade. The Lagos Plan of Action, adopted by the Second Extra-Ordinary Assembly of African Heads of State and Government in 1980, in Para. 256 (a) requires OAU member states to »urgently act to increase their effective participation in international economic negotiations«. Para. 25 1 (d) asks for »measures to set up a new trading framework at the international level including agreement on new trading rules and principles« covering in particular structu ral adjustment, preferential treatment for developing countries and elimination of (neo-)protectionist measures. Generally, Para. 251 stipulates that »measures should be taken to diversify, both geographically and structurally, Africa's present trade patterns«. In the light of the present economic crises of Africa,4 these objectives have only gained in their importance. Active participation of African states in the discussions on the international framework for trade appears all the more called for as developments in the international economic environment are being judged to be »particularly unfavourable to African countries«.5 The improvement of the fr amework conditions for African trade have to be considered to be of first importance to solving the economic crises of the continent. This was also confirmed by the analysis of the Vice-president of the EEC-Commission, M. Natali in his address to the Special Session of the UN General Assembly devoted to the critical economic situation in Africa and held fr om 27 May to 1 June 1986 in New York: »Le SUCct!S de I'aide a I' Afrique depend de I'amelioration de l'environnement economique international. «6 Against the argument that this refers mainly to the prices of primary commodities, where a new deterioration of the terms of trade can be observed, it has to be held that African states do not unterstand themselves just as suppliers of raw materials for all times. On the contrary, they rightly aim at a larger share in manufactured products, which so far only constitute some 3 % of their exports. It is by industrialisation that Africa hopes to achieve the necessary diversification of its trade patterns, both with the North and with the South. For this purpose Africa will for a long time need market access under preferential conditions. While the Lome Agreement constitutes a legal framework which takes this need into account, diversification would also mean to develop the markets outside EEC-countries, namely the countries of the European Free Trade Association, the United States and Canada, Australia, New Zealand or the Asian states. For all these markets GATT constitutes the relevant framework for trade. Therefore, African trade experts are right to conc1ude that »the future of Africa's trade depends to a large extent on the perceptions of the African policy makers and on their negotiating capacity and skills in any new round of negotiations«.7

III. African Participation in GATT
African states still show a low profile in international trade negotiations, as can be seen in GATT where only a handful of African countries can be said to show some involve ment. But, in the membership of GATT, African states constitute a numerically impor tant group with 28 out of 91 full members, 12 more de-facto members and one provisio nal member. However, only 12 African countries are represented among the 69 members of the GATT Council, the main organ of GATT. Only 8 out of the 41 have signed any of the Tokyo Round Agreements of 1979.8 De-facto members of GATT are countries, to the territory of wh ich the GATT mies have been applied before decolonisation and which, after independence, maintain a de fa cta application of these mies pending a final decision as to their future commercial policy.9 This status allows the country concerned to benefit from most-favoured-nation treatment, without being itself obliged to enter into any new commitments. However, de-facto members do not participate in the activities of GATT. In practice this status, which was meant only for an interim period, has been prolonged again and again and deve10ped into a quasi-permanent status. The so-called MTN-agreements, which resulted from the Tokyo Round of multilateral trade negotiations like the Code on Technical Barriers to Trade, the Anti-dumping Code, the Subsidies and Countervailing Duties Code or the Arrangement regarding Bovine Meat contain numerous provisions in favour of developing countries.10 There fore, it seems that African states have not acceded to these codes for reasons of interest only, but also because of their lack of legal capacity of assessment and translation of these codes into their national legislations. However, this is held against them by indus trialized countries as lack of commitment and legal discipline. A lack of legal discipline on behalf of GA TT can also be found in other areas. Unlike other regions and contrary to their obligations under Article XXIV: (7) of GATT, African contracting parties have not notified GATT of any of the existing customs unions or free-trade areas within Africa to allow for an examination by the usual working party procedure. The exception which proves the rule is the Central African Economic and Customs Union.ll One could imagine that this was due to a variety of factors like in ability of staff, disregard of the GATT provisions and lack of interest also from the side of GATT itself, the contracting parties of which seemed not all concerned about this fact because of the limited trade impact. In the meantime, this practice has been legalized by the decision of the CONTRACTING PARTIES of 28 November 1979 on »differential and more favourable treatment, reciprocity and fu ller participation of developing countries«, the so-called »enabling clause«, which under Paragraph 2 (c) exempts »regional and global arrangements ente red into amongst less-developed contrac ting parties« for the reduction of tariff and, under conditions to be prescribed by GATT, also non-tariff measures on products exchanged from the requirement of most-favoured nation treatment of Art. I of GATT. As result of this provision the rigid criteria of Art. XXIV do not apply any more for customs-unions, free-trade agreements and other regional or global arrangements of developing countries, which have only the procedural obligation to notify such arrangements to GATT. This constitutes a major legal development in GATT law in recognition of the special needs of developing coun tries. Generally, there is little practice of African states with regard to GATT. The Protocol of Trade Negotiations among Developing Countries, which was brought into being within the framework of GATT as an initiative of non-aligned states in 1971 has Egypt as its on!j African member. African countries have been most hesitant to engage into meaning ful concessions. Hence, Nigeria has been blamed for showing its lack of commitment by having entered only into one concession in its schedule, namely on stock fish.12 The only waiver request known is by Malawi in the 60s.13 Malawi appears also to be the only African GATT member which has ever used the conciliation procedure of GATT  that other African members did not apply such measures, but obviously without using proper GATT procedures. The practice of Art. XIX, the safeguards clause of the GATT, shows a similar picture. Only in one ca se (Nigeria) has the safeguards clause ever been used by an independent African country. This leads to the conclusion that African countries have generally been lax in complying with their procedural obligations in GATT, which does not mean, however, that they can equally be blamed for disregard of their substantive commitments. It seems that African contracting parties by and large abide by the basic GATT principles and rules in their trade policies, such as the most-favoured-nation clause and the principle of non-discri mination. But they do rely on the spirit and the letter of the different provisions of Article XVIII and Part IV of GATT as weil as others like the GATT enabling clause, which authorize substantial exceptions, non-reciprocity and preferential and differential treatment. The pragmatic and flexible approach of GA TT traditionally pays more atten tion to substance than to procedure which can also be seen from the fact that the lack of procedural compliance of African count ries has not been criticized too much in GATT bodies.
Finally, African countries are particulary reliant on the services regarding trade pro motion of the International Trade Centre, wh ich is administered jointly by UNCT AD and GATT, and on technical assistance by the Technical Cooperation Division of GATT, which is mainly directed towards familiarizing officials from developing coun tries with the principles and rules of GATT as a basis for improved participation. For this purpose the Training Division of GATT organizes two so-called »trade policy courses« per year for civil servants from developing countries who get a solid introduc tion to the structure and functioning of the system of GATT. Since 1955, the regular training courses have been attended by 298 officials from 44 African countries and regional organisationsY It is an open question why those functionaries who are better educated in GATT matters than many of their European counterparts do not have more impact in their respective administrations to more effectively serve themselves of the instruments of GATT and participate in GATT activities.

IV. GATT and the NIEO
Whereas the Havana Charter for an International Trade Organization did take account of the special needs of developing count ries, its Chapter 111 on »economic development and reconstruction« and Chapter VI on »inter-governmental commodity agreements« did not find adequate reflection in the articles of GATT. However, in the following years the trade problems of developing countries led to some important adaptations of the text of the General Agreement. In 1955, Art. XVIII on »governmental assistance to economic development and reconstruction« was totally rephrased to better accomodate the idea of economic development: »The general concept of the new Article is that economic development is consistent with the objectives of the General Agreement and that the raising of the general standard of living of the underdeveloped countries wh ich should be the result of economic develop ment will facilitate the attainment of the objectives of the Agreement.«16 However, the exceptions for developing countries in the very complex Article XVIII did not prove sufficient, in particular for the export trade needs of developing countries. In 1957 the CONTRACTING PARTIES commissioned a report of a panel of experts on past and current trends in international trade. This »Haberler Report« of 1958 ended with the fo llowing general conclusion which in the African context seems to be still valid today: »The under-deveioped primary producing countries have an interest in obtaining from the highly industrialized countries aid and easier access to markets for their ex ports. The highly industrialized countries have an interest in the effects upon trade of these economic development policies of the underdeveloped primary producing coun tries. The only chance of a successful outcome is a negotiated settlement involving a gradual shift away from undesirable policies on both sides.«17 The report led to the establishment of different committees, one of which Committee III was responsible to look into »obstacles to the expansion of trad�, with particular reference to the importance of maintaining and expanding the export earn ings of the less developed countries«.18 The objective of expansion of trade of developing countries was also the focus of different declarations of developing countries and GATT ministers19 which resulted in the endorsement by a ministerial meeting in 1963 of a programme of action, proposed by GATT developing countries as Part I of its conclu sions, containing the objective of free access to markets of industrialized countries for tropical products and various types of action to further the trade and development of less developed countries. developing count ries and, whenever appropriate, measures designed to attain stable, equitable and remunerative prices for primary products«.26 During the negotiations a so-called »framework group« was entrusted with the task to elaborate appropriate texts to accomodate the needs of the developing countries. But only in 1979, at the end of the Tokyo Round, the CONTRACTING PARTIES adopted a decision on differential and more favourable treatment, reciprocity and fu ller participation of developing countries«, the so-called »Enabling Clause«, which finally provides a general legal basis for the Generalized System of Preferences, for regional and global co operation among LDC's and special treatment of least developed countries.
In addition, a special fo otnote allows for considering »on an ad hoc basis under the GATT provisions fo r joint action any proposals for differential and more favourable treatment« not covered by the general clause. This fo otnote has gained some importance as a legal basis both for the SP ARTECA agreement in the South Pacific and the unilateral Caribbean Basin Economic Recovery Act of the United States in fa vour of a number of Caribbean beneficiaries.27

V. »Graduation�� and African countries
One author, in a comparison of the trade policy recommendations of the »Charter of Economic Rights and Duties of States« (UNGA-Res. 328 1 (XXIX) of 1974) with GA TT law has come to the conclusion that most trade policy principles contained in this Charter have al ready been incorporated in GATT law.28 None-the-Iess, this and other authors29 claim that developing countries in total benefit little from the different exemp tions and preferences in their favour, because they constitute a disincentive to developing countries' governments to pursue economically efficient trade policies, whereas they contribute to a general erosion of the multilateral trading rules, which constitute a shield of protection for those countries. This leads to the assumption of an unfavourable »Iinkage« between the »positive discrimination« for the benefit of developing countries and the »negative discrimination« with which deve10ping countries increasingly are confronted in fo rm of neo-protectionist measures of all kinds. Furthermore, the report of seven eminent persons under the chairmanship of the Swiss banker Leutwiler found that the measures in favour of developing countries have served them little, they should better concentrate on exchanging concessions.)O Two kinds of comments have to be made to this sort of reasoning. First, it would be a dangerous approach to create the impression that there are hard rules concerning con cessions and soft rules as regards the treatment of developing countries on the basis of non-reciprocity. Second, developing countries in general will for quite some time not be able to negotiate on an equal fo oting; they will have to rely on the GATT rules allowing for exceptions and more favourable treatment.
It is an undue exaggeration to blame developing count ries having received recognition of their particular status and development needs for the erosion ofthe international trading order. The major exceptions from GATT rules which, in addition, are of particular disadvantage to the developing count ries date back to the 50s, i. e. the waiver allowing U.S. import restrictions on agricultural products of 1955 and the 60s, i. e. the cotton-tex tiles arrangement of 1961 which later became the Multifibre Arrangement and was prolonged in 1986 in a more restrictive version -in spite of all promises of liberalisation.
In addition most VERs and OMAs are negotiated with LDCs to limit their exports. Therefore, it is no surprise when a recent study by G. C. Hufbauer and J. J. Schott presents the particular interest of LDCs in the new round simply as getting the U .S. and Europe to respect their GATT obligations and eliminate trade barriers inconsistent with GATTY On the other side, it cannot be disregarded that there are growing diffe rences of economic level and competitivity among developing countries themselves. The General .System of Preferences, although most developed countries do already use diffe rentiated schemes, is being exploited by a handful of newly industrialized developing countries, whereas other developing count ries are not able to benefit fr om it in the same measure. The GATT Enabling Clause has already taken account of this problem by providing in Para. 7 that: »Less-developed contracting parties expect that their capacity to make contributions or negotiated concessions or take other mutually agreed action under the provisions and procedures of the General Agreement would improve with the progressive development of their economies and improvement in their trade situation and they would accordingly expect to participate more fu lly in the fr amework of rights and obligations under the General Agreement.« What is expressed here in terms of »participation« is called the principle of »gradu ation«. But is does not contain any specific rule of graduation. In general, newly indus trialized developing countries (NICs) may ga in competitivity in some sectors but not in their economy as a whole. Therefore, they still require preferential treatment although not in all sectors. But there is no agreement whatsoever when the conditions for gradu ation are reached. In reaction to increasing pressures form their own producers the United States has unilaterally graduated out a number of products of newly industria lized countries like Hongkong, South Korea and Taiwan applying certain criteria of competitive need.32 For developing count ries which have not reached a higher level of economic develop ment, which means for alm ost all African countries, graduation is not to be expected in the near future. The graduation of the NICs may, in principle, improve the value of the GSP for them. Special treatment for least developed countries is also a weil established principle of the GATT Enabling Clause. The basic idea behind is the principle of substantive equality which, according to the I LA »declaration on the progressive development of principles of public international law relating to a NIEO«, adopted in Seoul in 1986, justifies preferential and non-reciprocal treatment of and among developing countries, »in view of their differentiated needs of development.«B There are considerations of equity, fa irness and justice which require that developing countries are treated according to their needs and abilities. Developing countries' solidarity should not stand in the way of such a differentiated approach. In addition to this kind of graduation by »graduating out« certain products and coun tri es from particular (GSP) benefits, there is also another form of graduation, which I would like to call »indirect graduation«. Indirect graduation works the other way round: by granting special advantages to particular countries or groups of countries the other developing countries stay behind, they are put on a lower level of favourable treatment. The most common form of indirect graduation is the special treatment of least develop ed countries. However, there are numerous other forms of special advantages for particular groups of developing countries, as in the ca se of the Caribbean Basin Initiative and, in particular, in the case of the Lome Agreement, of which the black African states are the main beneficiaries. Although the Lome Convention in Art. 1 pledges to consti tute a model for the economic relations between developed and developing states and, in fact, reaches a high standard in terms of the international law of development34 the EEC has never accorded the same treatment to other (groups of) developing countries. There fore, Lome constitutes a case of indirect graduation, which is legitimate in view of the fact that alm ost all ACP-states belong to the low-income developing countries. How ever, the Lome agreement as an interregional cooperation agreement together with numerous other co operation agreements of the EEC with developing countries has also led to a fragmentation of the international trade regime which today has to be reviewed for its negative consequences for the multilateral trade order. Differentiation in preferential treatment raises the question of non-discrimination in international trade. The principle of non-discrimination is one of the cornerstones of the multilateral trade order of GATT. The unconditional most-favoured-nation clause of GATT, Art. I, is based on that principle. But, already with regard to the Tokio Round Codes the United States have used discriminatory measures to force developing coun tries to sign that codes. In the forthcoming new round of negotiations there is a danger that a conditional MFN-clause is being applied to force the NICs to make adequate concessions, both in material terms and with regard to the legal framework of GATT. These are negative consequences of the growing fragmentation in the international trade regime. Therefore, the principle of elimination of discriminatory treatment in interna tional commerce as contained in the law of GATT to be realized on a multilateral basis today may gain new significance. It is becoming more and more a shield of protection of LDC's against bilateral pressures for special arrangements and a means towards secur ing market access. It is the task of the lawyer to reconcile the principles of differential treatment and of non-discrimination. GATT law itself provides the clue. To take up the distinction in a book by an experienced GATT staff member, we have to distinguish between non-discri mination erga omnes and non-discrimination inter partes. 35 The principle of non-discri mination erga omnes is the general rule. Exceptions from it have to be based on legiti mate grounds, namely on special rules of GATT, like the GATT Enabling Clause, which takes account of the principle of non-discrimination inter partes. Discrimination not covered by such legal authorization constitutes a violation of GATT law.

VI. The New Challenge
With regard to trade the Lome Agreement has shown that, although it constitutes a comprehensive legal approach, it also is of a limited nature. For example, during Lome II the ACP exports to the EEC have fallen significantly, whereas to other destinations ACP countries could even enlarge their share. In spite of this fact, ACP states did not re ach any substantial improvement with regard to market access in the negotiations on the chapter on trade co operation of Lome II I. 36 In conclusion, African states are weil advised not to satisfy themselves with the trade opportunities of the Lome Agreement but also to take advantage of their rights under the multilateral trading order of GATT. Given the fact that the preferential access provisions in the ACP -EEC convention are limited to five years it seems worth considering if African states should not try to seek improved access for some of their products even in the EEC by negotiating for reduc tions and bindings of tariffs on a MFN basis, in particular in ca ses where the margins of the special preferences enjoyed by ACP states are insignificant. Another major concern of African states could be negotiations to reduce existing tariff escalations, which consti tute disincentives to the exports of processed goods both to the EEC and elsewhere. Today, preparations have star ted for a new round of multilateral trade negotiations, the so-called Uruguay-Round, which offers itself as a special opportunity to address the interests of African states. GA TT constitutes the only forum for real negotiations on the international framework for trade. There are two main reasons fo r LDC's including African count ries, to partici pate actively in these negotiations. First, negotiations will result in a package approach, in which LDC's are better able to incorporate their special interests. Second, the prob lems in international trade law cannot be perceived any more on North-South lines alone. Since the emergence of the debt crises in particular one can observe a new conver gence of interests between developed and developing countries. What could be taken for granted 10 years ago, namely the existence of a rule-oriented multilateral regime for international trade, today is subject to erosion, and a growing grey area of qon-tariff protectionist measures affects developing countries as weil as industrialized countries, in particular the sm all ones. Market accessthe main interest of LDC's in international trade -today more than ever is endangered by the practices ofthe new protectionism like Voluntary Export Restraints and Orderly Marketing Agreements. But overcoming the new protectionism and assuring market access is also a prerequisite for the repayment of debts and thus a solution of the debt crises.37 A new effort to reach a nstandstill« and nroll back« of these measures is attempted in the new round. This problem is regarded both in UNCTAD and in GATT as the main problem of present international trade relations but it is mainly in GATT where real remedies can be found. For some develop ing countries the disadvantages of negative discrimination, which is against the spirit if not the letter of GATT may already outweigh the benefits from positive discrimination, i. e. preferential treatment. For this purpose, it will be necessary that African countries clarify their priorities with regard to their problems and interests to be pursued in the new GATT round as early as possible. A lot of groundwork has been done since the Tokyo Round, in particular by the Committee on Trade and Development of GATT which has undertaken numerous consultations on the operation of the Enabling Clause, on the needs of particular least developed countries and, in 1984, produced a study on nProspects for Increasing Trade Between Developed and Developing Countries. 38 Analyses of the Tokyo Round negotiations have led to the conclusion that nthe codes could have been more favourable to the developing countries had they more effectively participated in the negotiations«. 39 Among the topics agreed upon by the GATT Ministerial Conference of Punta dei Este40 wh ich might be of particular interest to African count ries are tariff graduation for pro cessed goods, agricultural trade, textils, tropical products, natural resource-based pro ducts, including processed goods therefrom and, generally, the strengthening of GATT rules, in particular with regard to all fo rms of neo-protectionism. Another issue of special interest to African countries, which has been present in GATT from very early on concerns the persistent decline of commodity prices. African count ries are fu rther con cerned with the exports of domestically prohibited goods into their markets. These are products Iike pharmaceuticals, fe rtilizers, insecticides etc. which are prohibited to be sold in the domestic markets of the producing countries because of the risk they consti tute for the health of the human and animal populations as weil as the natural environ ment. In this respect international control measures are to be sought and GATT could constitute a forum for this purpose. The new round of multilateral trade negotiations, opened by the conference of ministers in Punta dei Este in September 1986, will also have to take up some unfinished issues of th � Tokyo Round, of which the question of a code on safeguard measures in interpretation of Article XIX of the General Agreement is also of primordial interest to LDCs. 41 The Ministerial Declaration of 29 November 1982, which set out a work programme including, in a special annex, issues of particular concern to developing countries42 has proved unable to achieve the desired objectives without a major effort, such as the new round. The complex issue of services, which had delayed agreement on a new round because of the opposition of some LDCs seems not to create a major problem for the African countries at present. 43 This time free-rider benefits cannot be taken for gran ted for LDCs any more. A kind of open graduation is being aimed at by industrialized countries, which means, that LDCs should make adequate contributions, according to their state of development.44 African countries certainly will be the last to be expected to make large contributions, but to show their commitment by some kind of contribution will be highly appreciated. This could take the form of tariff concessions or of legal commitments, Iike signing some of the GATT codes. Although not being affected in the first place African states should further be concerned with the elaboration of general criteria and conditions for guide lines on fuller participation in the framework of GATT rights and obligations by devel oping countries if such an approach becomes feasible at all. Generally, African GATT member states, of which a number have accepted even supervision by the International Monetary Fund, should not find it too demanding to commit themselves to larger participation in the GATT framework in general. For the 12 de facto-members, they might consider taking that opportunity to accede fully to GATT, which could strengthen the African group. The services of ECA and other competent institutions should be commissioned to assist in developing adequate strategies to translate the objectives spelled out in particular in the Lagos Plan of Action into an African Common strategy to the negotiations in the new round of GATT.
The new GATT round therefore asks for the active participation of developing countries, and African countries should not miss that opportunity to pursue their interests.
African states are found to fo cus their interests excessively on the Lome agreement whereas the GATT provides a set of multilateral rules relevant also to all non-EEC trade. The fo rthcoming »Uruguay Round« of multilateral trade negotiations, wh ich is to produce new rules in various fi elds of trade, constitutes a particular challenge for a more active participation of Africa, to prevent the erosion of preferential rules (graduation) and to achieve better conditions of market access worldwide. Islamic banking brings many changes in the modes of agricultural financing. It has consequences for the mobilization of rural savings and implications for the character of rural banks. The Islamic Banking System introduced in Pakistan distinguishes between three groups and twelve modes of financing. The main modes of agricultural fi nancing are interest free loans, mark-up loans and, exclusively for medium and longterm financing, leasing and hire purchase. From the middle of 1985, Pakistani banks have not accepted any interest-bearing depos its; savings accounts are only accepted on a profit-and-loss basis. Discussion is con troversial with regard to the question of how depositors will react to the abolition of interest. There is a strong body of opinion holding that, for avoiding exploitation of the depositors, a scheme has to be devised which ensures profit within a reasonable range. Trying to conform to Islamic economic doctrine and considering the comparatively high risks of Islamic modes of financing, the banks have lost their character as simple retailers of money and acquired that of partners with greater responsibility for the viability and profitability of the ventures into which they enter. Moreover, to give savers a stronger opportunity to observe what is done with their funds, there is a specific impulse for control of the banks' activities by the depositors. This means that the philosophy of Islamic banking has institution al implications which are in harmony with a stronger participation of the rural population in the development process. At the same time, however, there are some signs which make one sceptical as to whether institu tional reforms will really take the direction envisaged. The organizational aspect of a proper balance between borrower, bank and depositar seems to deserve greater attention in order to make banks a real part of rural society.